PM uses photo op to hail manufacturing's progress in hard times

There is no crisis in the manufacturing sector, says Key. Photo / Paul Estcourt

It cost Luke Mathieson about $800,000 to buy the state-of-the-art Chinese-made machinery that Prime Minister John Key officially launched at Real Steel in Upper Hutt yesterday.

If the exchange rate had been any lower, it would have cost him an awful lot more.

Mr Key's appointment to launch the biggest press-brake in New Zealand was set in his diary weeks ago, but the timing couldn't have been luckier, politically.

Opposition parties and unions are turning the heat on the Government over the high kiwi dollar and what it is doing to manufacturing.

The Greens have suggested the Reserve Bank undertake quantitative easing - printing money - to help bring it down.

Mr Key - brought all the way to Upper Hutt from Hollywood, the MC joked - was happy to soak up the success of a business in the manufacturing sector that was doing well.

"Despite what you might read in the paper or hear on TV, many of them are doing extremely well indeed," he told the group.

Manufacturing in the last four years contributed between 11.7 per cent and 11.9 per cent of GDP - it wasn't growing massively but it wasn't in decline.

Speaking about the exchange rate, Mr Key said that well over half the manufactured goods in the world had imported components in them.

It could be tough on commodity-linked sectors such as dairying when the exchange rate rises but there was always another side.

"It is not a single story in one direction," the Prime Minister said.

The way to support the manufacturing sector was to concentrate on the things the Government could control, labour laws, tax rates, opening up trade markets, cutting compliance.

Mr Key said the printing of money in Zimbabwe had made it a very poor country and it wouldn't work in New Zealand.

"It would put up the price of virtually everything New Zealanders would buy; it would add to inflation; if you are a retired New Zealander it would eat away at your savings; petrol would go up; your mortgage rate would go up."

New Zealand had options, including dropping interest rates below the 2.5 per cent official cash rate.

Mr Key said he would not be attending the Engineering, Printing and Manufacturing Union jobs crisis summit on Friday.

"There is not a crisis in the manufacturing sector. It is just tough on some businesses."

Q & A:

Q: Is it true that most businesses in the manufacturing sector are also exporters?

No. Just 42 per cent were involved in exporting and 58 per cent were not in 2011.

Q: What proportion of sales from exports contribute to overall sales in the manufacturing sector?

Just 7 per cent of companies are in the group whose export sales make up 75 per cent or more of overall sales; four per cent of companies are in the category in which 51 per cent to 75 per cent of overall sales is in export sales, 8 per cent are in the 26 to 50 per cent group; 23 per cent are in the 1 to 25 per cent category; and 58 per cent of manufacturing businesses had no export sales.

Q: Do manufacturing companies import much?

41 per cent of them imported raw material, components or equipment and 19 per cent of them imported finished goods for resale in New Zealand.

Source: Statistics NZ. Figures relate to the 4983 manufacturing businesses with more than six employees in 2011.